Gas Prices Have Politicians Talking in Washington
RENEE MONTAGNE, host:
In our business news today, rising gas prices.
The average price of gasoline nationwide is now within a dime of the $3.00 mark. And that's putting pressure on lawmakers to at least look as if they're doing something.
Gasoline prices are 30 percent higher than they were a year ago, but so far, the effect on the broader economy has been smaller than might be expected.
NPR's Scott Horsley reports.
SCOTT HORSLEY reporting:
Tempers are rising almost as fast as the price of gasoline, and the grumbling will likely get louder this week when ExxonMobil and some of the other big oil companies report big quarterly profits.
Democratic Senator Carl Levin, of Michigan, told CNN's Late Edition over the weekend, oil companies should be forced to give some of that money back.
Senator CARL LEVIN (Democrat, Michigan): These profits have been absolutely obscene. They're out of control, and I think I hear more about the price of gas from back home than just about any subject.
HORSLEY: Republican leaders have also called for an investigation of high oil prices by the Justice Department and the Federal Trade Commission.
Crude oil prices fell a bit yesterday, but remain above $73 a barrel. Daniel Yergin, who heads Cambridge Energy Research Associates, says an unhappy combination of problems in places like Nigeria, Venezuela, and Iraq, have drained more than two million barrels a day from global oil supplies.
Mr. DANIEL YERGIN (Chairman, Cambridge Energy Research Associates): Right now, what you've had is this kind of slow motion supply shock. But when it adds up, you have an aggregate disruption that is really quite significant.
HORSLEY: Retail gasoline prices have also been pushed up by recent refinery outages. That problem should ease in the next few weeks. But even when all refineries are running, there's not a lot of capacity to spare.
Bruce Smith, who heads the Tesoro Refining Company, says that's not likely to change anytime soon.
Mr. BRUCE SMITH (President and CEO, Tesoro Corporation): It's just hard to see that there's going to be significant changes in capacity, in refining capacity, in the near-term, just due to the construction time, the permitting process, of being able to put new capacity on line.
HORSLEY: High gasoline prices are taking a toll. Outside Uncle Joe's Pizzeria in San Diego, the sign that used to say free delivery now says just delivery. Owner Marsha Duka(ph) started charging $3 for deliveries when gas prices spiked last year. Since then, she's worked hard not to increase the fee or raise the price of her pizza.
Ms. MARSHA DUKA: I want to have a loyal customer base, and I think that's important. A lot of people who are my--who I buy product from, they've already raised their prices. But I haven't.
HORSLEY: There are at least two other pizza places in the neighborhood, which helps keep a lid on Duka's prices.
Fierce competition has had a similar effect in many industries outside of transportation. Energy economist Stephen Brown, of the Federal Reserve Bank in Dallas, says that's a big reason why the sharp run-up in energy prices has barely spilled over into other parts of the economy.
Mr. STEPHEN BROWN (Director of Energy Economics and Microeconomic Policy Analysis, Federal Reserve Bank, Dallas, Texas): Businesses have been very reluctant to pass cost increases through. And they've been unable to. In a lot of cases where businesses tried to, the market forced them back down.
HORSLEY: The Federal Reserve is watching though, for any signs of more generalized inflation that could prompt the Fed to act more boldly in raising interest rates, and that, in turn, could put the brakes on the overall economy.
Scott Horsely, NPR News, San Diego.